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For two hypothetical… (Class 12 Economics SQP 2024-25, Q14B)

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EconomicsCBSE Class 12 · Sample paper, session 2024-25 · 4 marks · Short answer

CBSE Class 12 Economics sample paper 2024-25: question 14(B)

From the official CBSE sample question paper for 2024-25, section A, question 14(B), for 4 marks. Try it first; the hints and our step-by-step solution are below.

Q14(B) · 4 marks · Short answerDetermination of Income and Employment

For two hypothetical economies A and B, the value of Marginal Propensity to Consume (MPC) stands at 0.6 and 0.8 respectively. Assuming for both the economies, Autonomous Consumption () to be ₹ 40 crore and Investment Expenditure (I) to be ₹ 100 crore.
Calculate:

  1. (I)

    Break-even level of income for Economy A

    2 marks
  2. (II)

    Equilibrium level of income for Economy B

    2 marks

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2024-25.

Hints

Open one hint at a time and try again before the next.

Hint 1

Break-even: income equals consumption.

Hint 2

Equilibrium: Y = C + I.

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. (I) Economy A: at break-even, Y = C, so Y = 40 + 0.6Y

    ½ mark

  2. Y − 0.6Y = 40, so 0.4Y = 40

    ½ mark

  3. Y = 40 ÷ 0.4

    ½ mark

  4. Break-even income = ₹ 100 crore

    ½ mark

  5. (II) Economy B: at equilibrium, Y = C + I = c̄ + MPC·Y + I

    ½ mark

  6. Y = 40 + 0.8Y + 100

    ½ mark

  7. 0.2Y = 140

    ½ mark

  8. Equilibrium income = ₹ 700 crore

    ½ mark

Answer: (I) Break-even income of A = ₹ 100 crore. (II) Equilibrium income of B = ₹ 700 crore.

Where the marks are

  • Each part: condition, substitution, working, answer (½ each)

Revise the chapter

Practise this chapterBoard-style questions from Determination of Income and Employment, one at a time, marked against the answer key and marking points.Back to the full paperSample paper 2024-25: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.